Country Report South Korea September 2009

Summary

The president, Lee Myung-bak of the ruling Grand National Party (GNP), will continue to face difficulties in maintaining the full support of his party and improving public confidence in his abilities as a leader.
The run-up to the three by-elections that are due on October 28th will be a focus of intra- and inter-party conflict. The result of the polls will provide a barometer of popular support for Lee Myung-bak and the GNP.
In August Lee Myung-bak met senior North Korean officials in South Korea's capital, Seoul. The meeting has raised hopes of an overdue improvement in inter-Korean links, but relations will remain volatile.
A Comprehensive Economic Partnership Agreement was signed with India in August. The government will continue to pursue trade agreements in order to improve market access for South Korea's exporters.
Monthly economic indicators have continued to improve in recent months. As a result, the Economist Intelligence Unit has revised up its real GDP forecast for 2009 to a fall of 1.6%, from a decline of 1.8% previously.
A recent sustained strengthening of the won in the international foreign-exchange market has led us to revise our exchange-rate forecast for 2009 to an average of W1,296.8:US$1, from W1,306.4:US$1 previously.

The death on August 18th of Kim Dae-jung, South Korea's president from 1998 to 2003, brought the main political parties and the nation together, at least briefly.
In early August Lee Myung-bak named Park Geun-hye, his main rival in the GNP, as a special envoy to Europe. This was no doubt an olive branch to Park Geun-hye, who retains the support of many GNP politicians.
Two senior North Korean officials met Lee Myung-bak in August. These were the first official political talks between the two countries since the president took office in February 2008.
The government has continued to remove legal barriers that have in the past prevented South Korean chaebol (conglomerates) from owning domestic commercial banks.
Both consumer and business sentiment have continued to improve in recent months, according to the latest surveys released by the Bank of Korea (South Korea's central bank).
In the first six months of 2009 the current-account surplus reached US$21.8bn, compared with a deficit of US$5.4bn in the same period of 2008.

This report covers the following industry codes:
SIC Code: 60;37
NAICS Code: 52;336